The South African Auto Component Industry Presentation by Roger Pitot NAACAM

Structure of the Industry in SA - OEMs European vehicle manufacturers BMW, DaimlerChrysler and Volkswagen are all 100% subsidiaries Japanese and other Multinational manufacturers, Ford, Nissan, General Motors and Toyota are now also 100% or majority controlled subsidiaries All other major marques are imported – European (Fiat, Peugeot/Citroen, Renault), Japanese (Daihatsu, Honda, Subaru), Korean (GM/Daewoo, Hyundai, Kia), Indian (Tata, Mahindra), and several Chinese brands in 2007. 2

The Motor Industry Development Programme (MIDP): Key Features Introduced 1995, extended to 2012, subject to review during 2006/7 Duties progressively reducing to 25% CBU and 20% components by 2012, from 115% and 50% in 1994 Duty-Free import of components of 27% of ex-factory price of vehicles produced locally Import credits earned for exports, with benefits reducing - tradeable Productive Asset Allowance (PAA) for Investments – duty credit of 20% over 5 years Minor programme for heavy trucks and buses

Future Direction of the MIDP Detailed review during 2006/7 focusing on investment and production support Ministerial assurances confirm government support through to 2020 Review will take account of South Africa’s WTO obligations by replacing direct export subsidy Future policy will support enhanced investment and production in the South African auto industry, particularly local components

MIDP : Industry Performance Since 1995 Significant improvement in quality and productivity. Progressive economies of scale with local platforms down from 42 to 23 Affordability – New vehicle prices below inflation for 8 out of 11 years Large growth in industry exports and, in recent years, significant growth in domestic market Stable overall industry employment with modest growth in specific sectors Trade deficit has worsened in past two years due to stronger currency, higher vehicle imports

Car Sales History – 1970 to 2006

Component Exports (R mil) 681 551 157 Road Wheels 2200 485 112 Engines and Parts 30503 12640 3318 Total Components 332 63 3 Axles 2006 2000 1995 Component 377 89 7 Car Radios/Players 880 76 Silencers & Exhausts 1220 682 219 Tyres 2549 1926 1019 Seats, Stitched Leather 15810 4682 388 Catalytic Converters 7

Component Export Destinations – 2006 Main destinations for SA component exports are the major first-world markets Germany 29% Spain 11% UK 9% France 7% Italy 2.2% Total EU 72% USA 10% 8

Component Manufacturers – Key 2006 Data The employment of the component manufacturers totals 79,000, growing at 1.5% annually Sales exceeded R56 billion (€7 bn), with 47% OE, 30% export, 23% aftermarket Capex was R2,2 billion Average local content of components exported was 80% Real Vehicle local content only 40% 8 of the top 10 global manufacturers are invested in South Africa.

South Africa as a Sustainable, Low-Cost Manufacturing Base World-class, low-cost infrastructure – railways, roads, harbours, telecommunications and electricity Well-developed, efficient capital market and world class banking and financial services sector Low manpower costs by first-world standards and abundant supply of trainable labour Low cost of factory establishment (competitive & efficient construction industry, low real estate cost) Abundant raw material availability and competitive tooling costs Competitive and efficient ocean freight and comprehensive airline network

Opportunities in South Africa What? Technology transfer Joint Venture production 2nd-tier supply Direct Investment Why? Advantage of a sustainable, low-cost manufacturing base Prospects for above-average economic growth in medium to long term Socio-political stability Sound macro-economic policies and targeted industry support Acknowledged good quality of life supported by first-world financial and IT infrastructureg

Thank You ! NAACAM is ready to assist you to participate in the South African Automotive Industry roger@naacam.co.za www.naacam.co.za